If you want to come up with a complete and efficient estate plan, there are certain things to avoid doing. Here are the most common estate planning mistakes.
Defining an ‘Estate’
An estate is defined as the net worth or all the properties of a person. That includes real estate and land, cash, bank accounts, house or houses, life insurance, investments, personal possessions, and other assets. Everyone, regardless of social or financial status, has an estate. As such, everyone needs a good estate planning attorney.
An estate planning lawyer helps you plan what you want to do with your estate. This professional will help ensure that all legal requirements are in place for the transfer of your assets to your chosen family members and beneficiaries after you pass away.
Additionally, your estate planning lawyer will also help you work on other estate-related tasks like naming a guardian and manager for your minor children’s inheritance, life insurance details, and care instructions if you become disabled.
Not Having a Real Estate Plan
Some people claim to have an estate plan, but when you ask them about it, all they can show you is a list of their properties and assets and the names of people they’re leaving their estate to. However, a list is not a real estate plan; it’s just a list.
If you do not have one yet, find a good lawyer who can help you draw up a complete, detailed estate plan. In cases where the estate owner does not have a plan or will, the state will have the legal power to decide which property or asset goes to certain family members. Your loved ones won’t have control over the distribution.
Common Estate Planning Mistakes: Not Regularly Updating It
There are times when you need to update or modify your plan because of certain situations or changes. A change in your financial status results in modifications in your estate plan. If your family welcomes a new member, such as a grandchild or son/daughter-in-law, your plan should be updated as well. If there are tax law changes, you should meet with your lawyer to determine its effects on your plan.
Updating your estate plan also helps in situations where there is a need to change the designated beneficiaries.
Review and update your plan regularly to ensure that it can still deliver the tasks or actions and results you want.
Not Designating a Guardian or Manager for Minor Children
If you want to leave some of your estate to minor-aged members of your family, you have to appoint a guardian who can help take care of them. In most cases, a manager is also assigned to manage whatever is left to the minor beneficiary. The best example of this is a trust fund.
Also, indicate in detail your direction for how to use the money for the children, as well as how and when it should be given to them. Finally, who do you designate to guide them until they reach legal age?
If you plan to leave money for the children, put it in a trust fund and do not give the guardian or manager the authority to decide how to use it. Your instructions should be clear and complete in the estate plan or will. T
he guardian and manager’s role is to make sure that your requests are correctly carried out. Without a legal guardian and manager, the children must follow the state’s decisions on the management and distribution of the estate.
More Estate Planning Mistakes: No Long-Term Care and Disability Plans/Incapacity Planning
Nursing homes and senior home care can be expensive, so if you do not include it in your estate plan, you might encounter some difficulties if you’ll need such services in the future.
Including disability care in your estate plan means you’ll have to purchase the right disability insurance. Your lawyer can help you find a good insurer who can give you a good disability care package.
Incapacity planning is also essential. If you become disabled or incapable of conducting business because of physical or mental causes, the court will take over the handling of your assets regardless of what your will states.
The court appoints someone to sign on your behalf. This appointee will decide how to use your assets to provide for your care. This process continues until you recover or pass away.
The best way to prevent this from happening is to come up with a living trust, which allows you to appoint a person or persons you trust and can act and make decisions for you.
Additionally, it would help if you also assigned someone to handle health care and health-related decisions for you; most preferably, your closest and most trusted family member.
Not Transferring Assets to the Trust
Ensure that you fund your trust, and it has enough assets. Otherwise, your beneficiaries and lawyer may have to go to court.
Regularly perform asset checks to be sure that they are transferred to your fund, especially if you have new or additional assets, such as recently buying a home. Funding your trust also means ensuring that it names property titles, bank accounts, and other legal papers.
Conclusion on Common Estate Planning Mistakes
Avoid committing the missteps above if you want a complete and efficient estate plan. Your estate planning lawyer should guide you every step of the way.
About the Author
Lauren Summers is the Content Marketing Strategist for Miller, Miller & Canby, one of the most respected law firms in Montgomery County, and the Washington, DC metropolitan area. The firm focuses on five core areas of practice. They are: Land Development, Real Estate, Litigation, Business and Tax, and Trusts and Estates Law. In her spare time, she reads books and plays board games with her husband and two kids.